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Notes on some inequalities in economics

Author

Listed:
  • Rolf Färe

    (Department of Economics and Department of Agricultural and Resource Economics,Oregon State University, Corvallis, OR 97331, USA)

  • Shawna Grosskopf

    (Department of Economics, Oregon State University, Corvallis, OR 97331, USA)

Abstract

Inequalities created by relating gauge (distance) functions and their dual support functions have been used in economics and operations research/management science to measure efficiency and productivity. The most familiar example is the Farrell (1957) measure of cost efficiency and its decomposition into technical and allocative components, which can be shown to be an application of the Mahler (1939) inequalities, although Farrell was probably unaware of the connection. In this short paper we add to this literature by providing explicit relationships between distance functions and support functions to form five different inequalities. These inequalities are derived from three support functions: the cost function, the revenue function and the profit function, and three gauge (distance) functions: the input distance function, the output distance function and the directional (technology) distance function.

Suggested Citation

  • Rolf Färe & Shawna Grosskopf, 2000. "Notes on some inequalities in economics," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(1), pages 227-233.
  • Handle: RePEc:spr:joecth:v:15:y:2000:i:1:p:227-233
    Note: Received: April 13, 1998; revised version: July 17, 1998
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    More about this item

    Keywords

    Mahler inequality; Distance functions; Duality.;

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D69 - Microeconomics - - Welfare Economics - - - Other

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